For the period between the end of WWII and 1979 there was productivity growth of ~ 55%. That means that for an hour’s work, the economic value grew by 55%. Over that period, workers’ wages grew in parallel. As the economy flourished, so did the vast bulk of the population
Many times over the past four or five years, we have mentioned the great wage stagnation that began in roughly 1979 and extends to today. Over that period, wages in America for the bottom 80% or so of the population have risen between 15% and 20%, depending on your inflation estimates. Meanwhile, labor productivity has grown by over 60%. Another measure of economic growth is Gross Domestic Product (GDP), the total of economic activity. GDP grew from $36,033 per capita in 1985 (2017 dollars) to $66,575 per capita in 2022 (2017 dollars), an 85% growth over 37 years. It is a struggle to turn these numbers and percentages into a concrete image of what has happened over the last 40+ years.
Recently, a friend referred me to American Compass. The tagline on their website is: “We are charting the course for conservative economics.” So not a left-wing think tank or university economics department. The mission page says, “Conservative Economics – Family, community, and industry provide the foundation for our nation’s liberty and prosperity.” American Compass has its own graphical representation of the great wage stagnation.
Cost of Thriving Index
American Compass has developed a neat tool, the Cost of Thriving Index (COTI) that provides a very concrete measurement of the impact of the great wage stagnation between 1985 and 2022.
“The Index measures the number of weeks a typical worker would need to work in a given year to earn enough income to cover the major costs for a family of four in the American middle class in that year: Food, Housing, Health Care, Transportation, and Higher Education.
In 1985, COTI was 39.7. Costs totaled $17,586, while the weekly income for a man aged 25 or older working full-time was $443 per week ($23,036 per year).
In 2022, COTI was 62.1. Costs totaled $75,732, while the weekly income for a man aged 25 or older working full-time was $1,219 per week ($63,388 per year.)”1
In 1985, a single male worker worked 39.7 weeks to pay for the basics of middle-class life for a family of four. In 2022, the same worker had to work 62 weeks (that’s 58% longer than in 1985) just to pay for the same basics. But, of course, there are still only 52 weeks in a year. So, he ended up $12,344 short for the basics over a calendar year.
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